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Audit Committee of the Board of Directors - Terms of Reference

5 pages
ASIAN DEVELOPMENT BANK Audit Committee of the Board of Directors Terms of Reference The Audit Committee is a committee of the Board of Directors established pursuant to Section 12 of By-Laws of the Asian Development Bank (ADB). Its function is to assist the Board of Directors in carrying out its responsibilities as they relate to ADB’s financial reporting and audits, including internal controls, in line with Article 31 of the Agreement Establishing the Asian Development Bank. The Audit Committee shall periodically review the adequacy of the Terms of Reference for possible adjustments as conditions dictate, and recommend necessary amendments to the Board of Directors, for approval. 1. AUTHORITY 1.1 In discharging its oversight functions over matters within the scope of its responsibilities, the Audit Committee is authorized to: (i) Perform activities within the scope of its terms of reference. (ii) Seek any pertinent information from the ADB as is necessary, and which shall not be unreasonably withheld. (iii) Refer its requests for documents or information to the President. (iv) Seek briefings on relevant auditing, accounting, and financial matters it has identified from staff member(s) designated by the President, including such staff that ACB has suggested, and request their participation in meetings. (v) Meet with the Outside Auditor, as necessary. (vi) Advise the Board of Directors on the appointment of the ...
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ASIAN DEVELOPMENT BANK
Audit Committee of the Board of Directors
Terms of Reference
The Audit Committee is a committee of the Board of Directors established
pursuant to
Section 12 of By-Laws of the Asian Development Bank (ADB).
Its function is to assist
the Board of Directors in carrying out its responsibilities as they relate to ADB’s financial
reporting and audits, including internal controls, in line with Article 31 of the Agreement
Establishing the Asian Development Bank.
The Audit Committee shall periodically review
the adequacy of the Terms of Reference for possible adjustments as conditions dictate,
and recommend necessary amendments to the Board of Directors, for approval.
1.
AUTHORITY
1.1
In discharging its oversight functions over matters within the scope of its
responsibilities, the Audit Committee is authorized to:
(i)
Perform activities within the scope of its terms of reference.
(ii)
Seek any pertinent information from the ADB as is necessary, and which
shall not be unreasonably withheld.
(iii)
Refer its requests for documents or information to the President.
(iv)
Seek briefings on relevant auditing, accounting, and financial matters it
has identified from staff member(s) designated by the President,
including such staff that ACB has suggested, and request their
participation in meetings.
(v)
Meet with the Outside Auditor, as necessary.
(vi)
Advise the Board of Directors on the appointment of the Outside Auditor
and consider any question of the Outside Auditor’s resignation and
dismissal.
(vii)
Consider the independence of the Outside Auditor, including the provision
of non-audit services by the Outside Auditor to the ADB.
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2.
COMPOSITION AND TENURE
2.1
The Audit Committee (the Committee) shall consist of not more than six
members of the Board.
The Chair and other members shall be appointed by the
President in consultation with the Board.
2.2
The Committee members shall be free from any relationship that, in the opinion
of the President, would interfere with the exercise of their independent judgment as
members of the Audit Committee.
The Committee members shall inform the President
of any circumstances which reasonably may be perceived to interfere with the exercise
of their independent judgment as members of the Committee.
2.3
The President shall, when appointing members of the Committee, appoint at
least one member, having a background in accounting or related financial expertise, and
who through education and/or experience would have a thorough understanding of
financial, accounting and auditing functions
1
.
In exceptional circumstances, where the
Committee requires specific advice and assistance to be able to perform its functions
and such advice and assistance is not available to the Committee members, including
from within ADB, the Committee may request the President to engage such outside
expertise and provide the necessary resources required for that purpose.
2.4
The Committee shall be appointed for a term of two years, commencing 1 July
each year in which the election of Directors occurs.
Members of the Committee may be
reappointed.
2.5
If a member of the Committee ceases
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President, in consultation with the Board, shall appoint another Board member for the
remaining term of the Committee.
3.
MEETINGS
3.1
The Committee shall meet as often as it considers necessary, but not less than
once per quarter.
Other Board members may attend meetings of the Committee as
observers.
Directors’ Advisors may attend the meetings of the Committee except as
otherwise advised by the Chair of the Committee.
3.2
The Committee will meet at least once a year with the Outside Auditor without
Management or ADB staff present.
In addition, the Committee may meet with the
Outside Auditor if requested by the Committee or by the Outside Auditor, as and when
considered necessary.
1
Section 10(a) of the Rules of Procedures of the Board of Directors states: “Membership of the
Committees established pursuant to Section 12 of the By-Laws need not be limited to
Directors or their Alternates.
The President, in consultation with the Board, shall appoint the
members of committees and shall designate the chairmen thereof.”
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3.3
The quorum for meetings of the Committee shall be three of its members.
If the
Chair of the Committee is unable to be present in person at a meeting, the members of
the Committee that are present shall select a member to preside.
4.
RESPONSIBILITIES
The Committee shall assess in its annual report the Committee’s work and
evaluate its
performance annually relative to the Committee’s purpose and responsibilities outlined
herein.
The Committee shall periodically review the adequacy of the Terms of
Reference for possible adjustments.
The Committee has an oversight function regarding
current areas of financial risk and how these are being managed and satisfy itself that
the ADB’s financial reporting and audits, including internal controls, are adequate and
efficient.
In this regard, it shall in particular:
A.
Financial Reporting
4.1
Review and if necessary discuss with the Controller the quarterly financial
statements.
4.2
Review and discuss with the Controller, Auditor General and Outside Auditor the
annual financial statements; major accounting and auditing issues and financial
statements presentations, including any significant changes in the selection or
application of accounting principles and auditing standards; and results of the audit by
the Outside Auditor.
4.3
Review and discuss with the Controller, Auditor General, Outside Auditor and
other ADB staff as required upon completion of the annual external audit before the
financial statements are published, the draft annual financial statements and the related
notes, the Outside Auditor’s opinion and appropriateness of accounting principles,
including disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”.
4.4
Meet with the Controller and Auditor General on a periodic basis to discuss any
matters of concern in the context of the disclosure of financial information and internal
control.
4.5
Meet with the General Counsel to discuss any significant pending litigation that
may have a material impact on ADB’s financial condition.
B.
Outside Audit
4.6
Appoint an observer to the Evaluation Committee for the selection of Outside
Auditor.
4.7
Review and discuss annually the scope of work and audit plan of the Outside
Auditor and any material changes to the audit plan during the year.
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4.8
Review and discuss the performance of the Outside Auditor and recommend to
the Board of Directors for approval, the appointment, extension of services after the
expiry of the contract period or
termination of the engagement of the Outside Auditor.
4.9
Review and obtain a statement from the Outside Auditor to confirm annually the
independence of the Outside Auditor.
Consider non-audit services by the Outside
Auditor, and if applicable, ensure that a framework for approval of non-audit services is
in place.
4.10
Review and discuss the annual management letter from the Outside Auditor as a
confidential document, and ensure that significant findings and recommendations made
by the Outside Auditor and Management’s responses thereon are reviewed, discussed,
and appropriately acted upon.
4.11
Meet separately, as necessary, with the Outside Auditor to review and discuss
any matters that the Committee or Outside Auditor believe should be reviewed and
discussed.
C.
Internal Audit
4.12
Review and discuss annually the scope of work and audit plan of the Auditor
General and any material changes to the audit plan during the year and, if necessary,
request that specific audits be added to the work plan.
4.13
Review and discuss the effectiveness of the internal audit function.
4.14
Review and discuss the annual summary of the audit reports (Audit
Recommendations Implementation Report) prepared by the Office of the Auditor
General.
Ensure that significant internal audit findings and recommendations and
Management’s responses are considered.
4.15
Meet separately with the Auditor General to review and discuss any matters that
the Committee or Auditor General believe should be reviewed and discussed.
4.16
Be consulted prior to the engagement or appointment of, and on any intended
removal of, the Auditor General.
D.
Internal Control
4.17
Review and discuss the effectiveness and integrity of the internal control system,
including risk management, information technology security and control, and financial
policies in such areas as trust fund administration, procurement policies and procedures,
and financial management.
4.18
Review and discuss
with the Controller, Auditor General and Outside Auditor
issues with respect to financial systems, and review of internal controls over financial
reporting, including significant findings and recommendations, and Management’s
responses thereon.
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E.
Anti-Fraud and Anticorruption Measures
4.19
Ensure that ADB has established and maintains appropriate, efficient and
consistent procedures for the receipt, retention and treatment of complaints and
anonymous submissions from internal and external complainants, including
protection of
“whistleblowers”, in regard to fraud and corruption, or questionable accounting or
auditing matters.
4.20
Meet annually with the Auditor General to discuss significant activities and
outcomes of the anticorruption function.
F.
Reporting Responsibilities
4.21
The Committee reports to the Board of Directors through the President in his
capacity as Chairman of the Board.
4.22
The Committee shall:
(i)
Report to the Board of Directors annually on its activities and submit
conclusions and/or recommendations as the Committee deems
appropriate.
(ii)
Update the Board of Directors about the Committee activities, as
appropriate.
(iii)
Ensure the Board of Directors is aware of matters that may significantly
impact on the financial affairs of ADB.
5.
ADMINISTRATIVE ARRANGEMENTS
5.1
The channel of communication between the Committee and ADB’s Management
and staff is through the Secretary of ADB.
5.2
The Office of the Secretary shall be responsible for providing the necessary
administrative services for the functioning of the Committee including providing a
secretariat for the Committee and maintaining its records.
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